When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased.

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Business

Pitts

20 June, 04:16

When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased.

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Rachel · Answer 1

False

Explanation:

While preparing the raw material budget for the period we calculate the total purchases to be made in the period concerned to meet the demand of raw material.

Demand in the period concerned = Total raw material required in production in current period + Total balance of inventory to be kept as closing inventory of current period - The opening available balance of inventory.

This is equal to the purchases to be made.

Thus, closing inventory is added and opening is deducted.

Therefore, the statement is question is not correct and is therefore, false.